The Compelling Business Imperative of Open Source Software
...Open Source is beneficial because its participants are socially optimizing the value of their work. By building on a base of work that is open to the public, Open Source developers reduce the amount of repetitive work that each has to do...
...The program often does what its author needs it to do, not what other potential users might expect or want it to do. That key marketing function, product management, simply doesn't exist.....
|One of the principles of network design and optimization is the distinction between "selfish" and "social" optimization.
The protocol that a computer uses to communicate on a shared network
can be optimized to benefit a specific computer, to the expense of
others who share the network. For example, a single node on a shared
Ethernet might use shorter-than-average backoff times, so that it often
goes ahead of others, or it might cheat on TCP's "slow start"
congestion control policy. In such situations, the overall throughput of
the network declines; if too many computers practice selfish
optimization, the network is even subject to congestion collapse, a
kind of massive traffic pile-up when essentially nothing gets through.
Social optimization benefits all computers equally; it prevents
congestion collapse by having all users take only their own fair share
of the resources.
A similar principle seems to be applicable to the world of software as well. While software is not a closed network with a finite amount of bandwidth to be divided up, it is nonetheless subject to both selfish and social optimizations. This may explain the natural growth in the related "Open Source" and "Free Software" movements, which are producing "free" software that competes, often successfully, with proprietary products. Open Source is beneficial because its participants are socially optimizing the value of their work. By building on a base of work that is open to the public, Open Source developers reduce the amount of repetitive work that each has to do, allowing each developer to focus on new capabilities and product differentiators.
The software developer community is fundamentally divided into two camps. A minority of developers is engaged in the production of software as a product which is licensed for a fee. The largest example of this, of course, is Microsoft. Other firms such as Oracle, Symantec and Corel specialize in this; it is also a major revenue stream for computer companies such as IBM and Hewlett-Packard. For these companies, open source software represents a threat. Linux now represents the largest threat to Microsoft's dominance of the desktop; it and the BSDs already command a large share of the server market.
The larger number of developers,
though, are not engaged in selling software; they are instead writing
software to solve specific problems on behalf of their employers. Such
in-house developers are the major beneficiaries of free software. Not
only does it reduce the price they have to pay, compared to proprietary
systems, but it also provides them with a code base to build on to.
They have to reinvent fewer wheels, and are thus free to concentrate
more closely on their specific tasks. In-house programs and even
in-house modifications to GPL code are not subject to that license's
strict sharing requirements. Thus a company can use Linux, BSD or even
open source Windows tools to produce process control, financial,
scientific, and other internal applications.
Proprietary software still has its place. Some applications are very support-intensive; for example, an antivirus program is almost useless if it is not updated for a month. And some vertical market applications, like telephone billing, are extremely complex and have narrow target marketplaces. Commercial software provides a viable "buy, don't make" alternative. Of course, such commercial software may itself benefit from open-source components or subsystems.
The biggest action will be behind the scenes, with servers and company-specific vertical applications. By providing a free and growing baseline upon which to build application-specific and user-specific code, open source software has created its own compelling business case. Companies should not be afraid to adopt it.
"Free" in this case has two different meanings, both of which fall within the same context of social optimization. "Free as in speech" is the mantra of the Free Software Foundation, whose General Public License (GPL) requires that programs which incorporate any GPL code are themselves subject to the GPL. Most of the Linux system is under the GPL. "Free as in beer" describes the Berkeley-style licenses used by various BSD systems. These can not only be used and distributed for no charge; they can also be incorprated freely into proprietary programs. Much of the Internet's core server software is under BSD licenses.
OS/2's eventual failure in mass markets, however, was less one of marketing than one of the monopolist's pressure. Microsoft reportedly told IBM that the price they would have to pay for o.e.m. Windows 95 licenses would be far higher than what its competitors paid, unless they agreed to limit OS/2 sales. The difference in Windows license fees alone was larger than total OS/2 revenues.
I suggest that
Apple has pursued a suicidal strategy here by tying sales of MacOS to
its own hardware. While this has helped their Macintosh hardware
line, it has crippled sales of the higher-margin software, especially
given the low incremental cost of software sales and the network
effects of higher market share. It is of course purely a matter of
speculation to guess how much profit Apple could have made selling
MacOS for PC-class commodity systems.